China Cracks Down on Crypto Money Laundering and Sets Legal Precedent

Chinese authorities recently dismantled a large money-laundering network in Beijing, uncovering approximately 800 million yuan ($111.36 million) in cryptocurrency transactions tied to telecom scams and online gambling.

The operation reportedly used overseas crypto platforms to hide the origins of these illegal funds, adding another layer of difficulty for law enforcement in tracking and preventing financial crimes.

This police action follows a significant legal case in China where, for the first time, individuals were sentenced for stealing private keys to digital wallets.

Prosecutors in Shanghai’s Xuhui District charged three suspects, including a man named Liu, for planting a backdoor into a wallet app, which gave them unauthorized access to over 27,000 mnemonics and 10,000 private keys. In response, local authorities are collaborating to create guidelines on managing virtual assets in criminal cases.

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In another development, China’s Supreme People’s Court and Supreme People’s Procuratorate provided new guidance on treating virtual asset transactions used for concealing or transferring illicit funds as money laundering. Attorney Shao Shiwei explained that virtual assets involved in funds linked to specific crimes could now be classified under money laundering laws.

Another attorney, Liu Yang, highlighted that this marks the first judicial acknowledgment of “virtual assets” in defining money laundering crimes, a move that clarifies the legal framework amid growing cases involving digital currencies.

While China’s ban on domestic crypto exchanges persists, holding or trading virtual currencies privately remains unregulated. However, this new legal interpretation may lead individuals to reconsider the potential legal consequences more carefully.

Alexander Zdravkov